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Unformatted text preview: g ) increases, the numerator increases and the denominator decreases. Therefore, the stock price will rise. (3) Longterm interest rates will fall according to the expectations hypothesis. In the generalized dividend valuation model with di/erent interest rates: P t = D t +1 1 + i t + r + D t +2 (1 + i 2 t + r ) 2 + D t +3 (1 + i 3 t + r ) 3 + : : : (2) the denominator of each term with a longterm interest rate fall. Therefore, the stock price will rise. 1...
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This note was uploaded on 07/17/2008 for the course ECON 520 taught by Professor Ogaki during the Spring '07 term at Ohio State.
 Spring '07
 OGAKI

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